think about getting the same interest rate
exposure on a lower capital regime by trading a future. I think capital will continue to
drive the evolution of this market into
more futures products,” he says.
One of the toughest tasks of launching a
new venture is building open interest.
Especially in the interest rate derivatives
space where despite a swathe of regulatory
reform, the use of OTC derivatives has not
been swayed over listed products.
Ross believes the fact that it is listing
Curve interest rate futures on the LSE
Derivatives Market while also offering
clearing on LCH means it will be a lot easier convincing participants to join.
“When you look at where people have
tried to do this before, they’ve tried to
build their own vertical structure with a
new exchange and new CCP, and asking
people to come because of increased
As the Basel III capital rules continue to
strangle banks capabilities in the space,
and with the cost of capital being passed
down to the buy-side, Ross believes having
a venue that can achieve savings by linking
up with LCH and its liquidity pool will
“To begin with we are listing very simi-
lar products to those listed on Eurex or
ICE. But we are doing that because we
have been told by our clients to list and
That has more intrinsic value and worth
far more than the current value of Curve.
If Eurex really want to make markets out-
side of mainland Europe, they will have a
joint venture vehicle with banks, so it is a
win-win,” Ross explains.
Outside of the politics of the LSEG-Deutsche Boerse merger, Curve is set to
join an interest rate derivatives market
which has not seen the large scale migration of OTC to futures trading that
many industry experts previously
Speaking at this year’s FIA IDX conference in London, panellists argued that
there has not been a large-scale migration
to new futures products that mimic interest rate swaps because of issues with
liquidity and certain barriers to entry.
Furthermore the development of portfolio
compression tools, such as those from
LCH, have allowed banks and trading
firms to carry on using swaps.
However, Ross argues that the transition from OTC to futures trading is a
longer-term trend, which will make Curve
attractive to swaps traders and to bring
“I think that we are in the short-term
and some way off the migration of OTC
products to the futures space. I think
change is coming and that is pushing more
people into standardised products. For
example, if you are trading a swap on a SEF,
I don’t see why you wouldn’t eventually
“I think change is coming and that is pushing
more people into standardised products.”